Trade Setup for This Week - USD/JPY Short

7 Feb 2016

USD/JPY - Bear Market. Retail traders are net long 2.8:1. This confirms further downside continuation risk outweighs upside risk at the moment. Negated if price closes on Daily Chart above 1.1832 handle and 9/21 EMAs have crossed up. Bearish bias also negated if retail trader positioning drastically falls or reverses.

Trade Options

Option 1: Wait for price to retrace to resistance zone near 118.50 and then PA signal to short. Profit target near 116.00.
Option 2: Wait for price to retrace to close below 116.00 level then retrace to resistance zone near 116.00. Then PA signal to short. Profit target near 114.50.

8 Feb 2016

Nota

Retail net long open interest pulling back from earlier 2.8 levels to 2.6392, indicating retail traders are starting to sell into the rising market price. This is exactly what one would expect. Short bias still intact. Looking for price action trigger to sell at any of the Fib levels or 8/21 EMA layer in confluence with key horizontal resistance level. Short entry would be further supported if retail trader long open interest increases again.

8 Feb 2016

Nota

Retail net long open interest pulled back further to 2.6180 as price continues retracing.

8 Feb 2016

Nota

Net long positions now down to 2.5171, still very one-sided to the upside, which confirms holding a short bias is correct as long as the market price structure still remains bearish. Implied volatility this week is very low with almost no high event risk until Thursday across the board. These conditions are good for trend continuation.

9 Feb 2016

Nota

Price closed down today on a break below the key 116.00 support handle. Vigorous continuation move so far today. Retail net open long positions have increased from 2.5171 yesterday to 2.5608 as of 10:09PM ET today. This confirms that short risk continuation is more probable that long reversal risk for the time being. Trading Option 2 is now in focus.